“In all the drawdowns in the market, BFSI will be the one which is hit the most, whether it is the GFC (global financial crisis) or 2001, 2014, demonetization or DHFL. But, it will also bounce back,” fund manager Aishvarya Dadheech said in a virtual press conference.
BSE Bankex is the worst hit among sectoral indices and despite the recent rally in the market, it is still down more than 33 per cent for the year to date. The economy came to nearly a standstill in late March as Prime Minister Narendra Modi imposed a nationwide lockdown which extended till the end of May.
‘BFSI is integral to the economy. Our economy works on the velocity of money. It’s a chicken and egg story,” he said.
That said, the sector may throw up a new bunch of leaders who manage to pass the stress test.
“Every single time BFSI bounces back, men will be separated from the boys,” Dadheech argued saying that the stronger players will be able to battle the storm better than the relatively weak counterparts.
He said the asset management firm was very optimistic on the pack, and this is possibly the right time to invest.
Sushant Bhansali, CEO, Ambit Asset Management said the pessimism on BFSI was probably overdone.
“If you look at the numbers of all the companies so far – specifically BFSI – I think the pessimism was overdone to an extent. That is what is (aiding) the recovery we are seeing in the market,” Bhansali said.
Dadheech also agreed that the market at large was not yet factoring the possibility of a second wave of the coronavirus crisis.
“I believe the market is not factoring a second wave as of now. India has not yet plateaued its number of cases,” he said.
With a record 15,968 coronavirus cases reported in the past 24 hours, the total count in India has risen to 4,56,183. The death toll has gone up to 14,476 as Covid-19 claimed 465 lives in 24 hours.
Dadheech however pointed that the majority of fresh Covid-19 cases were originating in a few states and were not a pan-India phenomena.
Maharashtra has reported 1,39,010 cases, followed by Delhi at 66,602 and Tamil Nadu at 64,603. Maharashtra has reported 6,531 coronavirus deaths followed by Delhi at 2,301 and Gujarat at 1,710.
“The rest of the economy is opening up and that is what the market is all excited about. We are seeing that the future is not that bleak. If we hit a second wave, possibly we might not see a lockdown, but the market can see a strong pullback,” Dadheech explained.
“(Market) may or may not go down. We do not know,” he stated. “If we suddenly see the cases plateauing, we might see a rally in the market. It is difficult to take a call on markets from here.”
That said, volatility will continue to be the flavor of the season, and investors should approach the market with a longer-term horizon.
“We are working on a thesis that you will see an earnings cut, a GDP cut and we will see a lot of heightened volatility for the next 3-4 months,” he said.
It is difficult to comprehend what is in store for India in terms of how the Covid-19 crisis plays out.
“From a global perspective, Italy and South Korea are on one end and US on another. We don’t know how things will play out for us,” said fund manager Manish Jain, adding that the firm’s endeavor was to build a portfolio which will continue to perform regardless the situation.
“Investors should have a longer-term approach. Have a 3-5 year horizon. If you have that kind of a horizon, you are in a good space,” said Jain.
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